All eyes are on Italy, where 5-Star.....>

EGB SUMMARY: All eyes are on Italy, where 5-Star and League meet to hammer out a

policy plan, having apparently made progress on forming a government.

- With populist policy likely in the offing in such a scenario, BTPs have once

again moved out, with the spread over Bunds rising by 4.7bps to 137.0bps, though

somewhat off the 138.9bps high set early in the session. The spread is close to

breaking the technical downtrend in place since May 2017, 140bps the key level.

- Bunds moving in the opposite direction to BTPs, with the Jun18 future up 20

ticks to 159.05. Curve continues to flatten as Schatz showing little movement,

with 2s-10s down nearly a basis point to 112.5bps.

- Flattening too in Euribor futures, with blues up 2-2.5 ticks and whites and

reds not keeping pace. Large selling noted in Jun18 contract this morning and

last night. 

- Bank of England decision at 1200BST could stir things up on any result outside

of consensus, which is for Base Rate to remain at 0.50%, with a 7:2 vote. Market

pricing for hike today just 10% probability. US CPI up later too (1230GMT).